The R200-million fraud case against former Fidentia head Arthur Brown and Dr Piet Bothma has been transferred to the Cape Town Regional Court so a trial date can be arranged. Brown appeared briefly in the Cape Town Magistrate's Court on Friday, without Bothma. Brown has brought a High Court application for a temporary stay of prosecution until the finalisation of the investigation against him, but it will be heard only in mid-November.
Brown wants three separate fraud cases against him to be combined so he can be charged from one charge sheet and in one court. But Marco Martini, Bothma's lawyer, argued that this would further prejudice his client, who has had to fly repeatedly from Joburg to attend court proceedings in Cape Town.
Bothma is the former Transport, Education and Training Authority head. State advocate Jan van Vuuren, SC, asked on Friday that a warrant of arrest for Bothma be authorised, but held over until the next court date in two months. Van Vuuren said the State received a letter from Martini's office reiterating that Bothma was being discriminated against, and said the State would, by the next date, determine whether the case against Bothma and Brown should be separated, and whether Bothma would be tried in Joburg.
Brown, who is out on R1-million bail, faces several criminal charges in connection with the alleged misappropriation of funds meant for widows and orphans of mineworkers who invested with Fidentia. A regional court case - in which Brown is alleged to have transferred R4,5m from mining supply company Fundi's account - and moved more than R5m from the loyalty card operation Infinity to his own account and that of close business associate Graham Maddock, is set to go to trial in September next year. In another case, Brown and investor Jacobus Theart, accused of fraud and theft of R800 000 from private investment company Antheru, are expected to appear in the magistrate's court early next month.
The case involving Brown and Bothma was postponed to November 23.
Showing posts with label Arthur Brown. Show all posts
Showing posts with label Arthur Brown. Show all posts
Monday, September 21, 2009
Monday, June 22, 2009
Fidentia curators probe 'significant entity'
Fidentia's curators have been probing a deal involving "a significant entity in the financial-services industry", according to a report made public on Monday.
In the report, dated March 10, curators Dines Gihwala and George Papadakis detailed how they had recovered, or had firm agreements on, about R160-million of Fidentia cash. They also listed a number of assets that still had to be sold, including the Sante Winelands Hotel and Spa at Franschoek, and Fidentia's former headquarters in Cape Town's Century City, for which they are seeking more than R53-million. "There is also a transaction involving a significant entity in the financial-services industry, which may be liable to the curators in a transaction that appear[s] to be a sham," they said. "Inasmuch as the curators are still investigating this claim, they are reluctant to disclose the identity of such entity to ensure no reputational damage is suffered by such entity, just in case it turns out that the information at the disposal of the curators is unreliable and/or inaccurate."
Former Fidentia boss J Arthur Brown is currently facing criminal charges related to the Fidentia debacle. One-time Fidentia accountant/financial director Graham Maddock is behind bars after entering a plea agreement with the Scorpions, which involves testifying against Brown. The curators said in their report that Maddock had undertaken in the plea agreement to pay them R6,3-million. Of this they had so far received R2,8-million, from the sale of the Maddocks' Constantia family home.
An associate of Brown's, Louis Koen, had agreed to repay R10,9-million, and had so far handed over R3,2-million of this. Johan Linde, who received R5,1-million as purported dividend and restraint of trade agreements, had paid over the entire amount to the curators. These amounts make up part of the R160-million total. The curators said summonses for similar payments, totalling more than R20-million, had been issued against Johan de Jongh, Hjalmar Mulder and Zacharias Brown.
Also unresolved were claims of R8,5-million against former Fidentia director Rudi Bam, R24,7-million against Brown and his wife, Susan, and R77-million against businesses formerly controlled by broker Steve Goodwin. Goodwin was jailed two months ago, in another Scorpions plea agreement, after being apprehended in the United States. Gihwala has previously said that the shortfall on Fidentia's books could be as much as a billion rand.
The publication of the curators' report, available on the Financial Services Board's website, follows an order made by the Cape High Court last week.
Source: Mail & Guardina
In the report, dated March 10, curators Dines Gihwala and George Papadakis detailed how they had recovered, or had firm agreements on, about R160-million of Fidentia cash. They also listed a number of assets that still had to be sold, including the Sante Winelands Hotel and Spa at Franschoek, and Fidentia's former headquarters in Cape Town's Century City, for which they are seeking more than R53-million. "There is also a transaction involving a significant entity in the financial-services industry, which may be liable to the curators in a transaction that appear[s] to be a sham," they said. "Inasmuch as the curators are still investigating this claim, they are reluctant to disclose the identity of such entity to ensure no reputational damage is suffered by such entity, just in case it turns out that the information at the disposal of the curators is unreliable and/or inaccurate."
Former Fidentia boss J Arthur Brown is currently facing criminal charges related to the Fidentia debacle. One-time Fidentia accountant/financial director Graham Maddock is behind bars after entering a plea agreement with the Scorpions, which involves testifying against Brown. The curators said in their report that Maddock had undertaken in the plea agreement to pay them R6,3-million. Of this they had so far received R2,8-million, from the sale of the Maddocks' Constantia family home.
An associate of Brown's, Louis Koen, had agreed to repay R10,9-million, and had so far handed over R3,2-million of this. Johan Linde, who received R5,1-million as purported dividend and restraint of trade agreements, had paid over the entire amount to the curators. These amounts make up part of the R160-million total. The curators said summonses for similar payments, totalling more than R20-million, had been issued against Johan de Jongh, Hjalmar Mulder and Zacharias Brown.
Also unresolved were claims of R8,5-million against former Fidentia director Rudi Bam, R24,7-million against Brown and his wife, Susan, and R77-million against businesses formerly controlled by broker Steve Goodwin. Goodwin was jailed two months ago, in another Scorpions plea agreement, after being apprehended in the United States. Gihwala has previously said that the shortfall on Fidentia's books could be as much as a billion rand.
The publication of the curators' report, available on the Financial Services Board's website, follows an order made by the Cape High Court last week.
Source: Mail & Guardina
Monday, April 20, 2009
Fidentia's Goodwin goes to jail
A key figure in the Fidentia saga, Steve Goodwin, has been convicted of fraud and corruption, and of money laundering involving about R93m. In terms of a plea agreement endorsed by the Cape High Court on Monday morning, he has been sentenced to an effective 10 years in jail. Part of the deal is that he will testify in criminal proceedings against his former associate, ex-Fidentia boss Arthur Brown.
Goodwin, a broker, fled to Australia in early 2007, shortly before the Scorpions began probing the Fidentia affair. He was arrested by the FBI at Los Angeles airport in the United States in April last year, and launched a protracted legal challenge - which he lost - to the extradition agreement between the US and South Africa. When he appeared before acting Cape judge president Jeanette Traverso on Monday morning, prosecutor Jannie van Vuuren said Goodwin had agreed to return voluntarily, and had waived his rights in terms of formal extradition proceedings.
The bespectacled Goodwin, sporting a bushy black beard and wearing a white shirt with no tie or jacket, was brought into the courtroom in handcuffs. He answered "I do, your honour," when Traverso asked him if he understood the terms of the 12-page agreement. She sentenced him to 20 years jail on one count of fraud, of which 10 years was conditionally suspended for five years.
On two counts of corruption, he was sentenced to one jail term of 15 years, of which five were suspended. On 33 counts of money-laundering, he was sentenced to one term of 15 years, of which seven was suspended. Traverso said the corruption and laundering sentences would run concurrently with the fraud. The 12 months he had spent in a US detention centre since April 7 would be subtracted from the jail time, she said. One of the conditions of the suspensions is that he testify against Brown, who is facing a range of fraud and theft charges.
According to the agreement, Goodwin played a key role in getting the Transport Sector Education and Training Authority (Teta) to transfer investments to Fidentia's control. To do this, he paid former Teta chief executive Piet Bothma bribes totalling R4.6m, which were disguised first as commission payments, then as a sale of shares in a shell company that had no assets. Although the plea agreement does not mention the amount of the investments, according to other prosecution documents it involved promissory notes worth just over R100m, which Fidentia then sold off to pay personal and company expenses and creditors. According to the agreement, Goodwin himself got about R32m of the Teta funds as his own share of the loot. To disguise what had happened, he complied fictitious monthly statements for the benefit of the Teta board, showing what the funds would have been at prevailing interest rates. The money laundering charge involved the flow of this cash through bank accounts controlled by Goodwin or companies he owned,including Worthytrade and Intaband. "To facilitate the aforementioned theft, and corrupt payments, devices were created and measures were taken to disguise the origin, nature and destination of monies," the agreement read.
It said though Goodwin had not been employed by Brown's Fidentia Asset Management, or privy to its internal arrangements, he had suspected a theft had taken place. "He was not aware at the time of the exact nature, quantum and source of the funds that are the subject matter of the theft. "He accepts that an amount of approximately R93m was laundered by him." In terms of the agreement, Goodwin would co-operate fully with prosecutors on the Fidentia investigation, assist Fidentia's curators "in their restitution efforts", and assist investigators in tracing the missing funds.
National Prosecuting Authority spokesman Tlali Tlali said outside the court afterwards that the state was "very pleased" with the outcome of the matter. "We are talking about a situation that involves acts of criminality that hit the hardest on the poorest of the poor," he said. Investigators were still pursuing "other legs of the investigation". "Hopefully soon we'll still be in court again, because we have other outstanding investigations that have to be concluded in terms of two other suspects."
Former Fidentia director and accountant Graham Maddock last year began a seven year jail sentence after pleading guilty to theft and money laundering. Prosecutors have also charged Teta's Bothma and broker Jacobus Theart. Though he is challenging the charges in the Cape High Court, Brown has been involved in plea bargain talks.
Source: News 24
Goodwin, a broker, fled to Australia in early 2007, shortly before the Scorpions began probing the Fidentia affair. He was arrested by the FBI at Los Angeles airport in the United States in April last year, and launched a protracted legal challenge - which he lost - to the extradition agreement between the US and South Africa. When he appeared before acting Cape judge president Jeanette Traverso on Monday morning, prosecutor Jannie van Vuuren said Goodwin had agreed to return voluntarily, and had waived his rights in terms of formal extradition proceedings.
The bespectacled Goodwin, sporting a bushy black beard and wearing a white shirt with no tie or jacket, was brought into the courtroom in handcuffs. He answered "I do, your honour," when Traverso asked him if he understood the terms of the 12-page agreement. She sentenced him to 20 years jail on one count of fraud, of which 10 years was conditionally suspended for five years.
On two counts of corruption, he was sentenced to one jail term of 15 years, of which five were suspended. On 33 counts of money-laundering, he was sentenced to one term of 15 years, of which seven was suspended. Traverso said the corruption and laundering sentences would run concurrently with the fraud. The 12 months he had spent in a US detention centre since April 7 would be subtracted from the jail time, she said. One of the conditions of the suspensions is that he testify against Brown, who is facing a range of fraud and theft charges.
According to the agreement, Goodwin played a key role in getting the Transport Sector Education and Training Authority (Teta) to transfer investments to Fidentia's control. To do this, he paid former Teta chief executive Piet Bothma bribes totalling R4.6m, which were disguised first as commission payments, then as a sale of shares in a shell company that had no assets. Although the plea agreement does not mention the amount of the investments, according to other prosecution documents it involved promissory notes worth just over R100m, which Fidentia then sold off to pay personal and company expenses and creditors. According to the agreement, Goodwin himself got about R32m of the Teta funds as his own share of the loot. To disguise what had happened, he complied fictitious monthly statements for the benefit of the Teta board, showing what the funds would have been at prevailing interest rates. The money laundering charge involved the flow of this cash through bank accounts controlled by Goodwin or companies he owned,including Worthytrade and Intaband. "To facilitate the aforementioned theft, and corrupt payments, devices were created and measures were taken to disguise the origin, nature and destination of monies," the agreement read.
It said though Goodwin had not been employed by Brown's Fidentia Asset Management, or privy to its internal arrangements, he had suspected a theft had taken place. "He was not aware at the time of the exact nature, quantum and source of the funds that are the subject matter of the theft. "He accepts that an amount of approximately R93m was laundered by him." In terms of the agreement, Goodwin would co-operate fully with prosecutors on the Fidentia investigation, assist Fidentia's curators "in their restitution efforts", and assist investigators in tracing the missing funds.
National Prosecuting Authority spokesman Tlali Tlali said outside the court afterwards that the state was "very pleased" with the outcome of the matter. "We are talking about a situation that involves acts of criminality that hit the hardest on the poorest of the poor," he said. Investigators were still pursuing "other legs of the investigation". "Hopefully soon we'll still be in court again, because we have other outstanding investigations that have to be concluded in terms of two other suspects."
Former Fidentia director and accountant Graham Maddock last year began a seven year jail sentence after pleading guilty to theft and money laundering. Prosecutors have also charged Teta's Bothma and broker Jacobus Theart. Though he is challenging the charges in the Cape High Court, Brown has been involved in plea bargain talks.
Source: News 24
Friday, April 25, 2008
Investigation into Teta almost complete
Fidentia CE J Arthur Brown was on Thursday late for a scheduled appearance in the Cape Town Magistrate's Court, on charges that include fraud involving the Transport, Education and Training Authority (Teta). In the dock without him were co-accused Dr Piet Bothma, Teta's CE, and a newcomer, Jacobus Theart, who is cited in the charge sheet as accused number three.
Scorpions prosecutor Bruce Morrison SC, assisted by Tersia du Toit, told the court they had called the case earlier than expected, and that Brown was not at fault for his absence. He and Du Toit had tried without success to telephone Brown to get him to court sooner, they said. The case was postponed to July 29 in Brown's absence.
Morrison said the investigation was almost completed and that there were "just a few more things to be done". He said he envisaged an additional charge to the current charges of fraud, corruption, money laundering, reckless trading and a contravention of the Financial Intelligent Centre Act.
The fraud charge relating to Teta involves over R2m. Theart faces charges of theft involving R800,000 and money laundering. However, Morrison did not indicate to the court how Theart fitted into the picture. He said both the Cape Town and Randburg Courts had jurisdiction to deal with the case, and he would launch an application to centralize the charges -- so they could all be dealt with together in Cape Town.
In the Teta case, the trio are expected to eventually go on trial in the Cape High Court. Later, Brown alone stood in the dock of the Cape Town Regional Court, where he is to go on trial on September 15 on two charges of fraud, one of theft and one of violating the Companies Act.
These charges relate to his involvement with Fidentia. In these proceedings, Du Toit told magistrate Wilma van der Merwe that she had furnished defence attorney Asghar Mia with further particulars to the charges. At her request the case was postponed to May 30.
Source: Moneyweb
Scorpions prosecutor Bruce Morrison SC, assisted by Tersia du Toit, told the court they had called the case earlier than expected, and that Brown was not at fault for his absence. He and Du Toit had tried without success to telephone Brown to get him to court sooner, they said. The case was postponed to July 29 in Brown's absence.
Morrison said the investigation was almost completed and that there were "just a few more things to be done". He said he envisaged an additional charge to the current charges of fraud, corruption, money laundering, reckless trading and a contravention of the Financial Intelligent Centre Act.
The fraud charge relating to Teta involves over R2m. Theart faces charges of theft involving R800,000 and money laundering. However, Morrison did not indicate to the court how Theart fitted into the picture. He said both the Cape Town and Randburg Courts had jurisdiction to deal with the case, and he would launch an application to centralize the charges -- so they could all be dealt with together in Cape Town.
In the Teta case, the trio are expected to eventually go on trial in the Cape High Court. Later, Brown alone stood in the dock of the Cape Town Regional Court, where he is to go on trial on September 15 on two charges of fraud, one of theft and one of violating the Companies Act.
These charges relate to his involvement with Fidentia. In these proceedings, Du Toit told magistrate Wilma van der Merwe that she had furnished defence attorney Asghar Mia with further particulars to the charges. At her request the case was postponed to May 30.
Source: Moneyweb
Friday, August 31, 2007
Fidentia trio in court again
Piet Bothma, the suspended chief executive of the Transport Education Training Authority, appeared in the Cape Town Magistrate's Court in connection with the Fidentia saga. It was Bothma's second court appearance. He was recently arrested as a third suspect in the affair.
Bothma was in the dock with Fidentia chief executive J Arthur Brown, and the company's former financial director, Graham Maddock, both of whom were arrested in March. Bothma was arrested on August 6, after he had flown to Cape Town with his attorney, Marco Martini, to surrender himself to the Scorpions.
The three appeared before magistrate Jesthree Steyn who, at the request of Scorpions senior counsel Bruce Morrison, postponed the case to February 12 next year. Morrison told the court the long postponement was needed to finalise the investigation, and to prepare the charge sheet. Attorney William Booth, who represents Brown, told the court he had no objection to the postponement, despite having at the previous hearing in May reserved the right to object to any further postponements for further investigation. Booth told the court: "Last time, I noted that I would object to any further postponement, requested by the State, for the purpose of finalising the investigation.
"I also said I would object if the defence had not at the present proceedings been furnished with the charge sheet. "I agree to the postponement to next year, but reserve the defence's rights to object if at the next hearing the defence has not yet been furnished with the charge sheet and other documents." Maddock was represented by attorney Cesare Baartman, who said he too would object if a further postponement was requested in February.
Technically, if the State again requests a postponement in February for further investigation, the defence will have the right to demand that the case be removed from the roll. If the case is then removed from the roll, it will amount to the withdrawal of charges, and the three will step out of the dock free men. The magistrate extended their bail: R1m in respect of Brown and Maddock, and R200 000 in respect of Bothma.
Source: News 24
Bothma was in the dock with Fidentia chief executive J Arthur Brown, and the company's former financial director, Graham Maddock, both of whom were arrested in March. Bothma was arrested on August 6, after he had flown to Cape Town with his attorney, Marco Martini, to surrender himself to the Scorpions.
The three appeared before magistrate Jesthree Steyn who, at the request of Scorpions senior counsel Bruce Morrison, postponed the case to February 12 next year. Morrison told the court the long postponement was needed to finalise the investigation, and to prepare the charge sheet. Attorney William Booth, who represents Brown, told the court he had no objection to the postponement, despite having at the previous hearing in May reserved the right to object to any further postponements for further investigation. Booth told the court: "Last time, I noted that I would object to any further postponement, requested by the State, for the purpose of finalising the investigation.
"I also said I would object if the defence had not at the present proceedings been furnished with the charge sheet. "I agree to the postponement to next year, but reserve the defence's rights to object if at the next hearing the defence has not yet been furnished with the charge sheet and other documents." Maddock was represented by attorney Cesare Baartman, who said he too would object if a further postponement was requested in February.
Technically, if the State again requests a postponement in February for further investigation, the defence will have the right to demand that the case be removed from the roll. If the case is then removed from the roll, it will amount to the withdrawal of charges, and the three will step out of the dock free men. The magistrate extended their bail: R1m in respect of Brown and Maddock, and R200 000 in respect of Bothma.
Source: News 24
Monday, August 6, 2007
Suspended Teta boss arrested
The suspended chief executive of the Transport Education Training Authority (Teta), Piet Bothma, has become the third person to be arrested in connection with the Fidentia affair. He appeared briefly in the Cape Town Magistrate's Court on Monday where he was released on R200 000 bail. Bothma has been charged with fraud and theft, and with corruption involving alleged kickbacks of just under R5m. He had earlier in the day flown down from Johannesburg with his attorney to report to the Scorpions' office in the city centre, where he was formally arrested.
Fidentia boss J Arthur Brown and financial director Graham Maddock were arrested in March, and are out on bail of R1m each.
Bothma was suspended from his Teta post in June. The State claims under the theft and fraud charges that he was part of a conspiracy with Brown, Maddock "and/or others" with regard to R200m that Teta invested with Fidentia Asset Management, now under curatorship. The corruption relates to an allegation that he got just under R5 million in unlawful kickbacks in the process. His attorney, Marco Martini, said neither he nor Bothma had any comment at this stage. "At this stage we're waiting to see a formal charge sheet," he said. Bothma will be in the dock alongside Brown and Maddock at their next court appearance on August 31.
Scorpions prosecutor Bruce Morrisson told the court the State did not object to bail, and that the amount had been agreed on by the State and defence. He said Bothma had co-operated with the Scorpions over his arrest, and had at the time of his arrest not given any false information. As part of his bail conditions, Bothma has been ordered to surrender all travel documents, and to seek Scorpions permission if he wants to leave South Africa. He has also been barred from communicating with any Teta board members, officials or employees. It is understood that the Scorpions are hoping to make further arrests in the case.
Source: News 24
Fidentia boss J Arthur Brown and financial director Graham Maddock were arrested in March, and are out on bail of R1m each.
Bothma was suspended from his Teta post in June. The State claims under the theft and fraud charges that he was part of a conspiracy with Brown, Maddock "and/or others" with regard to R200m that Teta invested with Fidentia Asset Management, now under curatorship. The corruption relates to an allegation that he got just under R5 million in unlawful kickbacks in the process. His attorney, Marco Martini, said neither he nor Bothma had any comment at this stage. "At this stage we're waiting to see a formal charge sheet," he said. Bothma will be in the dock alongside Brown and Maddock at their next court appearance on August 31.
Scorpions prosecutor Bruce Morrisson told the court the State did not object to bail, and that the amount had been agreed on by the State and defence. He said Bothma had co-operated with the Scorpions over his arrest, and had at the time of his arrest not given any false information. As part of his bail conditions, Bothma has been ordered to surrender all travel documents, and to seek Scorpions permission if he wants to leave South Africa. He has also been barred from communicating with any Teta board members, officials or employees. It is understood that the Scorpions are hoping to make further arrests in the case.
Source: News 24
Tuesday, March 6, 2007
J Arthur Brown arrested
The Scorpions have moved with astonishing speed, given that key components of the Fidentia Group were placed under curatorship just over a month ago, on February 2. Brown and Maddock were arrested in respect of criminal allegations relating to a transaction, or series of transactions, totalling R200m. The two men were immediately taken to the Cape Town Magistrates Court.
In the background lies a tangled web of burned cash, running to well over R1bn. The key victims of a massive scam conceived and perpetrated by Brown and his corrupt network are tens of thousands of widows and orphans registered under the Living Hands Umbrella Trust. In October 2004, R1,1bn belonging to the trust was transferred to Fidentia when Fidentia seized control of Living Hands Pty Ltd, the trust's administrator. This cash enabled Brown and his corrupt network to continue with a bizarre business model that appeared to be based on overpaying for acquisitions, in the hope that fresh cash could be seized to fund past peccadilloes. The business model was utterly unsustainable, and maxed out during the second half of last year, when the Financial Services Board started to take various Fidentia whistleblowers seriously.
The first hardcore cases of alleged fraud were outlined late in 2005. Hendrik Roedolf Bam, who worked in and around the Fidentia Group between December 2002 and December 2003, determined to expose the rot in Fidentia, eventually deposed several affidavits at a Cape Town police station, backed up by extensive annexures containing accounts and much other sensitive information. Bam showed how Maddock was not only auditor for Fidentia Holdings (for a certain period of time), he was also an ongoing director, employee and shareholder in the Fidentia Group through Bonus Way (12) (Pty) Ltd. Bam alleges that Maddock and Brown were involved in "so many instances of fraud that it would be impossible to unravel, if one does not start at a point".
Bam forewarns police that "during your investigation" it would be realised that client funds were handled out of Maddock's statutory trust account by Brown and Maddock without client permission and utilised for personal expenses, company expenses (including operating expenses), and "repaying other clients whose money they used" where earlier-dated money had fallen short. "When I asked Brown", Bam states, "why the company did not have its own banking accounts, Brown said for security purpose, safeguarding client funds. It later became clear that it was done to facilitate fraud of client's funds".
Reports filed after a limited inspection of Fidentia by the Financial Services Board (FSB) accused the group of inadequate corporate governance, material conflicts of interest, poor financial management and reporting, deviation from client mandates, misrepresentation to clients, defying the segregation of assets principle and co-mingling funds, misappropriation of client funds, misrepresenting investments, a probable shortfall in trust holding, and non-adherence to licence conditions. Clients, stated the FSB, would, according to allegations, "be paid out of new or existing client funds. The process then carries forward the problem to the next set of clients. In our opinion this modus operandi is akin to a pyramid scheme". It is apparent throughout the FSB report that Brown "is the directing mind and will of the group". The inspectors say emphatically that "Brown controls FAM [Fidentia Asset Management] and the client investment assets single handedly".
FAM's auditors reported certain irregularities in the conduct of the company's affairs to the relevant registrar. An affidavit by the responsible auditor, a CH Beekmans of Greenwoods Chartered Accountants, stated that the audit of FAM for the year ended 2005 was initiated by his firm on August 1 2005. But the auditors were unable to finalise and sign the audit report for the financial 2005 year, never mind 2006.
Source: Money Web
In the background lies a tangled web of burned cash, running to well over R1bn. The key victims of a massive scam conceived and perpetrated by Brown and his corrupt network are tens of thousands of widows and orphans registered under the Living Hands Umbrella Trust. In October 2004, R1,1bn belonging to the trust was transferred to Fidentia when Fidentia seized control of Living Hands Pty Ltd, the trust's administrator. This cash enabled Brown and his corrupt network to continue with a bizarre business model that appeared to be based on overpaying for acquisitions, in the hope that fresh cash could be seized to fund past peccadilloes. The business model was utterly unsustainable, and maxed out during the second half of last year, when the Financial Services Board started to take various Fidentia whistleblowers seriously.
The first hardcore cases of alleged fraud were outlined late in 2005. Hendrik Roedolf Bam, who worked in and around the Fidentia Group between December 2002 and December 2003, determined to expose the rot in Fidentia, eventually deposed several affidavits at a Cape Town police station, backed up by extensive annexures containing accounts and much other sensitive information. Bam showed how Maddock was not only auditor for Fidentia Holdings (for a certain period of time), he was also an ongoing director, employee and shareholder in the Fidentia Group through Bonus Way (12) (Pty) Ltd. Bam alleges that Maddock and Brown were involved in "so many instances of fraud that it would be impossible to unravel, if one does not start at a point".
Bam forewarns police that "during your investigation" it would be realised that client funds were handled out of Maddock's statutory trust account by Brown and Maddock without client permission and utilised for personal expenses, company expenses (including operating expenses), and "repaying other clients whose money they used" where earlier-dated money had fallen short. "When I asked Brown", Bam states, "why the company did not have its own banking accounts, Brown said for security purpose, safeguarding client funds. It later became clear that it was done to facilitate fraud of client's funds".
Reports filed after a limited inspection of Fidentia by the Financial Services Board (FSB) accused the group of inadequate corporate governance, material conflicts of interest, poor financial management and reporting, deviation from client mandates, misrepresentation to clients, defying the segregation of assets principle and co-mingling funds, misappropriation of client funds, misrepresenting investments, a probable shortfall in trust holding, and non-adherence to licence conditions. Clients, stated the FSB, would, according to allegations, "be paid out of new or existing client funds. The process then carries forward the problem to the next set of clients. In our opinion this modus operandi is akin to a pyramid scheme". It is apparent throughout the FSB report that Brown "is the directing mind and will of the group". The inspectors say emphatically that "Brown controls FAM [Fidentia Asset Management] and the client investment assets single handedly".
FAM's auditors reported certain irregularities in the conduct of the company's affairs to the relevant registrar. An affidavit by the responsible auditor, a CH Beekmans of Greenwoods Chartered Accountants, stated that the audit of FAM for the year ended 2005 was initiated by his firm on August 1 2005. But the auditors were unable to finalise and sign the audit report for the financial 2005 year, never mind 2006.
Source: Money Web
Friday, February 2, 2007
Millions missing in Fidentia scandal
Cape-based financial services and technology company Fidentia has been placed under provisional curatorship by the Cape High Court in what could be the biggest scandal to hit the financial services sector in recent years. In its application for the curatorship yesterday, the Financial Services Board told the court that its inspectors could not trace R680-million of almost R2-billion taken in from various investors by its asset management subsidiary, Fidentia Asset Management. Much of the money is owed to widows and orphans of deceased members of the Mineworkers Provident Fund.
Based on the papers before the court, the scandal could be even bigger than the Masterbond, Owen & Wiggens and FundsTrust scams that rocked Cape Town in earlier years. With hours of the successful court application, curators Dines Gihwala - a top attorney - and one of the country's outstanding forensic accountants, George Papadakis, entered the opulent Canal Walk headquarters of Fidentia to take control. In their hands was a report of an FSB inspection team which has been trying to unravel the mess for the past six months. The report which accompanied the legal papers in the court application spells out a litany of mis-management and misappropriation of investors' money; total disregard for laws protecting investors; and significant contraventions of the financial licence conditions of Fidentia Asset Management. And the executive chairman of Fidentia Holdings, Arthur Brown, is accused in the report of using millions of rands invested with Fidentia Asset Management for himself, channelling the money through various family trusts.
Over the past two years the company has bought up a diverse group of companies, ranging from the Sante Winelands Health Centre to parts of the imploded financial services company MCubed, paying amounts which, at the time of the purchases, were considered to be excessive. The purchases raised suspicions because the source of the money used by the company, which was operating out of a rented garage at the upmarket Sunset Beach development as recently as four years ago, was not apparent.The inspection team's report indicates that the money came from two main sources: R150m from the Transport Education and Training Authority and R1,4-billion from a umbrella trust fund established to pay pensions to widows and orphans of retirement fund members.
The Cape High Court placed the financial services business of Fidentia Asset Management (Pty) Ltd, Bramber Alternative (Pty) Ltd and Fidentia Holdings (Pty) Ltd under curatorship. The curators have until March 27 to report back on what they find. At that date the court will make a further decision. Russel Michaels, FSB chief communications officer, said to-day that under the provisional order, the curators must take immediate control of, manage and investigate the business and operations of the companies, with a view to conserving the business and not alienate or dispose of any of the property of the companies. "In exercising their powers, the curators have been directed to give consideration to the best interests of investors in the companies." Michaels said members of the public should not attempt to approach the curators for information, "as their time will be fully occupied by this assignment. Progress with the curatorship will from time to time be made available through the media".
The court has ordered that the curators should, at their discretion, continue to make periodical payments to the thousands of pension fund beneficiaries whose money was invested with Fidentia Asset Management. The court has authorised the curators to conduct any investigation required to track down assets and exercise powers to take control of or freeze banking accounts of all the entities involved.
Source: Business Report
Based on the papers before the court, the scandal could be even bigger than the Masterbond, Owen & Wiggens and FundsTrust scams that rocked Cape Town in earlier years. With hours of the successful court application, curators Dines Gihwala - a top attorney - and one of the country's outstanding forensic accountants, George Papadakis, entered the opulent Canal Walk headquarters of Fidentia to take control. In their hands was a report of an FSB inspection team which has been trying to unravel the mess for the past six months. The report which accompanied the legal papers in the court application spells out a litany of mis-management and misappropriation of investors' money; total disregard for laws protecting investors; and significant contraventions of the financial licence conditions of Fidentia Asset Management. And the executive chairman of Fidentia Holdings, Arthur Brown, is accused in the report of using millions of rands invested with Fidentia Asset Management for himself, channelling the money through various family trusts.
Over the past two years the company has bought up a diverse group of companies, ranging from the Sante Winelands Health Centre to parts of the imploded financial services company MCubed, paying amounts which, at the time of the purchases, were considered to be excessive. The purchases raised suspicions because the source of the money used by the company, which was operating out of a rented garage at the upmarket Sunset Beach development as recently as four years ago, was not apparent.The inspection team's report indicates that the money came from two main sources: R150m from the Transport Education and Training Authority and R1,4-billion from a umbrella trust fund established to pay pensions to widows and orphans of retirement fund members.
The Cape High Court placed the financial services business of Fidentia Asset Management (Pty) Ltd, Bramber Alternative (Pty) Ltd and Fidentia Holdings (Pty) Ltd under curatorship. The curators have until March 27 to report back on what they find. At that date the court will make a further decision. Russel Michaels, FSB chief communications officer, said to-day that under the provisional order, the curators must take immediate control of, manage and investigate the business and operations of the companies, with a view to conserving the business and not alienate or dispose of any of the property of the companies. "In exercising their powers, the curators have been directed to give consideration to the best interests of investors in the companies." Michaels said members of the public should not attempt to approach the curators for information, "as their time will be fully occupied by this assignment. Progress with the curatorship will from time to time be made available through the media".
The court has ordered that the curators should, at their discretion, continue to make periodical payments to the thousands of pension fund beneficiaries whose money was invested with Fidentia Asset Management. The court has authorised the curators to conduct any investigation required to track down assets and exercise powers to take control of or freeze banking accounts of all the entities involved.
Source: Business Report
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